Perseverance Pays

Though Cornelius & Anthony might only be two years old, the fledgling premium cigar company can trace its lineage in the tobacco world to at least the 1860s, when Cornelius Bailey planted his first tobacco crop in Southside, Virginia, about halfway between Richmond and Danville. For more than 120 years, the Bailey family proudly grew tobacco until an intense dislike for being at the mercy of cigarette companies’ manipulation of tobacco prices led Mac Bailey—the fourth generation of the family to be involved in tobacco—to seek new business opportunities, setting the course for the creation of Cornelius & Anthony in 2015.

The Bailey family history in tobacco, and its establishment of S&M Brands (a cigarette and little cigar manufacturer) and Cornelius & Anthony, provides an interesting lesson in how perseverance and a little luck can overcome big obstacles. Or as company president Steven Anthony Bailey likes to joke, “We’re just a little too stupid to quit.”

To be sure, the Bailey family has faced a lot of adversity transitioning from only tobacco growers to cigarette and cigar manufacturers. In 1979, Mac Bailey bought a tobacco warehouse in Clarksville, Virginia, and thus entered the tobacco brokerage business. A few years later, Bailey established another warehouse in Lancaster County, Pennsylvania, where he bought tobacco from Mennonite and Amish growers to sell elsewhere. As the business grew, Mac expected his son Steven to pitch in.

“If you grew up on a farm then you know that you are a good source of cheap labor,” Steven again jokes. “My father thought that you couldn’t succeed in life without working hard. I worked in the fields with the migrant workers we hired at the time beginning when I was 10 years old. Every day during the summer we worked in the fields, and there wasn’t any time for baseball or other things. When I was about 14 or 15 he started taking me to the warehouse. There was no time for holidays either. When I was 16 and could drive, I would sometimes have to take a load of tobacco up to Pennsylvania. I spent a Thanksgiving weekend doing that. I worked in Pennsylvania in the wintertime from 1986 to 1993, when we decided to get into the tobacco products business.”

Then in 1993, Mac told Steven that he wanted to get into the cigarette business. Fed up with the fluctuating prices the big tobacco companies paid at the time, Mac thought to cut them out completely and ordered Steven to figure out how cigarettes were made. A few months later, Steven had developed a blend.

The brand, Bailey’s cigarettes, was produced by a small private-label manufacturer in Virginia. Steven designed the packaging with an old computer program and fondly recalls the pride that he and Mac felt when they saw the cartons for the first time. He also remembers the sense of panic when it dawned on them that they had a brand but had no idea how to market it.

“We hit the road with our personal vehicles,” he says. “We sold 27 cartons of cigarettes the first week. Those were friends of friends who had a store and probably felt sorry for us. Another big issue was to figure out how to get the tax stamp on the cigarette packs. We bought tax stamps on a sheet of paper and used scissors to cut out each stamp and iron it onto each pack. We would have to do enough each night to go out the next day and try to sell them. That’s how we started.”

The Bailey work ethic paid off. Demand for Bailey’s cigarettes slowly grew, even while problems with the manufacturer arose, prompting Mac and Steven to start making the cigarettes themselves. The company, S&M Brands, hemorrhaged money and nearly closed down in 1997, but the Baileys pressed on. A year later, their fortunes began to turn around, and by 2002 the company was on a solid foundation.

“We went from selling our cigarettes from the back of a pickup truck to producing 2.8 billion cigarettes annually,” Steven marvels. “We were making a good product at a good price, and we went absolutely through the roof. I tell people all the time that we were so ignorant, and why we got into it I don’t know, but in spite of ourselves we survived.”

They may have survived, but Steven knew that the company had to diversify if it was going to continue in the long term. S&M Brands introduced Lex12 filtered cigars in 2010, which have done tremendously well in the little cigar market segment. Then Steven started looking at the premium cigar market. In 2013, he met with some manufacturers in the Dominican Republic and rolled out a project—Meridian cigars—for Cornelius & Anthony’s debut at the 2015 IPCPR show. True to previous Bailey projects, Meridian wasn’t as successful as the Bailey family had hoped it would be.

“It was a complete disaster,” Steven states more succinctly. “The product wasn’t what we had agreed upon. We introduced it, and it got into a few retail locations, and we discovered that it wasn’t what we thought it was. We went back to our retailers and bought it back from them because I didn’t want to ruin our reputation with an inferior cigar. We were going to either make it right or not make it at all.”

Also true to previous Bailey experience, Steven chose to mull over the problem and find a solution to it rather than scrap the project altogether. Through mutual industry friends, he heard about Courtney Smith, who had been vice president of La Palina since 2009 but had recently resigned. He drove the four hours from Southside, Virginia, to Washington, D.C., to meet with Smith. After just a few hours of conversation, Steven asked Smith to join Cornelius & Anthony.

“In 12 months she’s done a phenomenal job,” Steven says. “I attribute most of our success in the last year to her knowledge of the business. I couldn’t necessarily apply my knowledge of the cigarette business to the cigar business because they are completely different. I tried that, and it didn’t work. I made my share of mistakes, and I realized that I needed a cigar insider. I was fortunate enough to find her and have her join the company.”

As proof of Steven’s wisdom in hiring Smith, Cornelius & Anthony unveiled three new lines at the 2016 IPCPR show in Las Vegas and reintroduced a completely new version of Meridian. Steven and Smith have also forged close working relationships with Sandra Cobas, owner of El Titan de Bronze, which makes Cornelius cigars, and Erik Espinosa, owner of La Zona, which makes Cornelius & Anthony’s Daddy Mac, Venganza and Meridian brands (for a detailed description of each of these brands, see sidebar).

“Erik and Sandy are two folks who can be trusted,” he explains. “This is a relationship business, which is great for me because I love people. To me, it’s what business is supposed to be all about—a handshake and relationships you build with people. Cigars are a luxury product, and it’s our job to give the consumers a product that they can enjoy smoking when they have the time. Time is extremely valuable, and it’s up to us to give them something worthy of their time. And I think we’re doing that with Erik and Sandy now. It’s hard to come by good folks, and this is something that we all share a passion for. And I love being a part of it.”

Allied now with a trusted team, Steven looks forward to a future in the premium cigar industry despite impending Food and Drug Administration (FDA) oversight. As owner of S&M Brands, Steven has already had to deal with FDA regulation of the cigarette industry, and his company has been one of the only ones to successfully guide a new product through the FDA’s substantial equivalency process. He’s confident that there is a future for premium handmade cigars in the U.S., and he’s looking forward to being able to explore blends and exercise his creativity in bringing great cigars to the market. Most of all, he’s excited about introducing his family to a whole new group of tobacco enthusiasts.

“We’re going to be here when it’s all said and done,” he concludes. “We guarantee our products. It is our absolute passion to provide people with products they want to enjoy. Their time is limited, and there is only so much time that they can enjoy a cigar, and my hope is that we’re doing a good enough job to provide them what they’re looking for. All I want to do is to make Cornelius & Anthony a little bit better and not screw up my family’s name.”

Simple goals for a not-so-simple industry, but considering the obstacles the Bailey family has overcome already, they seem entirely obtainable. “This is a relationship business, which is great for me because I love people. To me, it’s what business is supposed to be all about—a handshake and relationships you build with people.”